VietNamNet Bridge – Vietnam has announced that it will join the negotiations for the Trans-Pacific Partnership Agreement (TPP). The Vietnamese business community has agreed that Vietnam needs to join the new game in the global integration, though it well understands that the new agreement will bring both great opportunities and challenges.

TPP seems to be a completely new concept in Vietnam. Therefore, people may still do not have sufficient information about the agreement, about the opportunities Vietnam will have and the challenges Vietnam will face, as well as the relation between Vietnam and the TPP’s members in the future.

A lot of questions have been raised about TPP. As planned, Vietnam will have to wrap up the negotiation with the US – the most important partner, next autumn. How has Vietnam been preparing for the negotiation and what position Vietnam is now in? Will Vietnam be able to grab the opportunities and cope with difficulties in the future?

Tran Huu Huynh, a Vietnamese Lawyer, Head of the Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI), Eric Emerson, a Lawyer from the US, and Pham Chi Lan, former Member of the Prime Ministerial Research Team, a well known economist, gave the answers to the questions, and provided necessary information and showed their viewpoints about TPP and Vietnam’s opportunities and challenges with the agreement at an online roundtable talk on November 30.

Huynh Tam, 31, from HCM City: What is TPP? What are the differences of the agreement in comparison with other agreements Vietnam has joined already, such as WTO, BTA or AFTA?

Lawyer Tran Huu Huynh: Vietnamese President Nguyen Minh Triet has announced that Vietnam will join the negotiations for the agreement.

In 2005, a TPP took shapewas established with the participation of four members, Brunei, Chile, New Zealand and Singapore. Since 2010, five countries have joined negotiations, including the US, Australia, Peru, Vietnam, and recently - Malaysia.

TPP is called the agreement of the 21st century not because of its stature and its possible influences. In terms of scale, if comparing with BTA, AFTA and WTO, TPP will cover a larger range of fields, from goods trade, service trade, investment and intellectual property…

Pham Chi Lan: Though TPP has just been kicked off, the agreement has caught the a special attention from many countries. Besides the eight countries that Huynh has mentioned, Malaysia has also decided to join. Four other countries have expressed their interests in the agreement and they may join the agreement in the time to come, including Japan, Thailand, the Philippines and Indonesia.

Therefore, a prompt process has been set up for TPP negotiations, under which everything must be completed by the end of 2011 and early 2012. It is clear that the countries like Vietnam, if wanting the want to join the agreement, needs to act quickly and quickly and make important decisions quickly.

Binh Nguyen, a real estate developer from Bac Ninh province: A question to Pham Chi Lan. How What would you say about the opportunities Vietnam will have when joining TPP? How would will the agreement affect the trade between Vietnam and countries from Asia Pacific?

Pham Chi Lan: First of all, Vietnam will have the opportunity to push up the mechanism  reform and business environment improvement, which will help create favourable conditions for the socio-economic development. The relations in the fields of trade, investment, education and science cooperation will rapidly be rapidly improved and expanded, thus giving more strength to Vietnam to develop in the new period.

Of Among the TPP’s members, there are important countries important to Vietnam’s economy, such as the US, Australia, New Zealand, or Singapore. These are also potential partners for Vietnam in investment. TPP may help push up the countries’ investments in Vietnam, especially in the fields Vietnam wants to develop, such as high technologies, industrial and service sectors, and in agriculture, thus helping Vietnam better join the global value chain.

In general, the countries in Asia Pacific are all the important economies for Vietnam. Two of the three biggest importers of Vietnam are the US and Japan. TPP will boost Vietnam’s exports to these countries as well as other members of TPP thanks to the commitments on market opening which are stronger and higher than the existing commitments.

A reader from quangt...@gmail.com: How will Vietnam be able to take full advantage of TPP, if it entirely opens its service, goods and investment markets? What would you say about the stand posituon? of Vietnam’s economy. When will be the most suitable moment for Vietnam to join TPP?

Lawyer Tran Huu Huynh: The “entire opening” proves to be the scenario which is not likely to happen even with a century agreement like TPP. A more realistic scenario is that nearly all tax lines will be cut under TPP, while member countries will make deep commitments on the opening in services sector and create favourable conditions for investments.

Regarding the capability of Vietnam to exploit opportunities and withstand challenges, it this will depend on many factors, especially the competitiveness of domestic production branches.

It is now difficult to say now how much time the negotiations will take, though the leaders want to see the negotiations end by 2012.

Thu Hang, 42, university lecturer in Da Nang: If joining TPP means that, Vietnam will have to carry out somea reform on some issues. For example, it will have to adjust the laws on labour to match theand make it suitable to the standards set by member countries. How far hasTo what extent is Vietnam prepared for this?

Lawyer Tran Huu Huynh: I have to remind you that to date, TPP is still under the negotiation process. TPP is the agreement under the building. Therefore, there are still not theth “standards set by member countries haven’t set any standards yet.

Regarding the laws on labour, it is not very likely that Vietnam will have to conduct a reform on the laws on labour as well asor other domestic laws, because TPP has not gone to discussed detailed commitments in detail.

At present, the issues raised in TPP negotiations include the right of workerslabourers to negotiate with employees, the pay, the number of working days, working conditions, insurance and the right in signing labour contracts…

Vietnam, as an equal a member who is on equal term with other members, has the right to make suggestions and, intervene in the setting of commitments. I have to emphasise that we are not in the passive mode in negotiations and we are not forced to accept all the commitments suggested by other members.

Pham Chi Lan: TPP negotiation is different from WTO negotiation. As for the countries which want to join WTO, they have to bear the “one way negotiation”, which means that the countries have to make commitments, and they do not have the right to change the existing rules. It took China 15 years and Vietnam 12 years to be admitted to WTO. As for TPP, Vietnam has the same opportunities like the other members to set up common commitments.

Nguyen Hanh Mai from Cao Bang province: When Vietnam joined WTO in 2007, we must had to follow the existing rules, no matter what they arewere. But if we join TPP at this time, Vietnam will be able to participate in the process of building TPP’s regulations. What suggestions should we make on TPP’s rules to ensure our benefitswe benefit from membership?

Lawyer Eric Emerson: This question highlights one of the most compelling reasons for Vietnam to be involved in the TPP negotiation process now:  the ability to be involved in structuring the agreement, rather than simply having to agree to its terms later on.

The answer to this question depends in part on the specific goals the country seeks in the negotiations.  One example of a potential rule change is mentioned above, that regarding the rule of origin for apparel products.  Changing or relaxing the “yarn forward” rule could substantially increase Vietnam’s access to the U.S. market.  Another is mentioned below, namely, seeking a rule to accelerate Vietnam’s graduation to market economy status in antidumping duty proceedings.

As a defensive matter, Vietnam will also want to focus on those issues where Vietnam’s unique position is not shared by other countries so that the rules of the agreement do not adversely affect the country.  For example, Vietnam’s economy continues to be dominated by state-owned enterprises to a greater degree than the other TPP countries.  Ensuring that these companies are not discriminated against could be an important goal.

Nguyen Van Chung, 50, from Bac Giang province: What are the benefits and challenges that for Vietnam will have when after joining the Trans-Pacific Partnership (TPP)?

Lawyer Eric Emerson: At a very general level, the most likely benefits to Vietnam will be increased access to large markets for its exports through lower tariffs, and a greater ability to attract foreign investment.   However, because these negotiations are still at a very early stage, the benefits of TPP will depend in large part on what Vietnam demands.

In the apparel area, for example, the United States has traditionally insisted on a “yarn forward” rule, under which the country of origin of a garment is the country in which the cloth was woven.  This means that apparel produced in Vietnam from Chinese textiles is treated as Chinese, even though it is cut-and-sewn in Vietnam.  As part of its negotiations, Vietnam could demand that the United States adopt a rule that would permit apparel cut-and-sewn in Vietnam to be of Vietnamese origin, regardless of the origin of the cloth.  U.S. textile producers would strongly oppose this change, but if this was one of Vietnam’s key demands, some relaxation of the normal U.S. rule might be possible, especially if this was accompanied by a reasonable safeguard provision to prevent import surges.

Vietnam will likely to face a number of challenges in implementing the TPP.  In my view, here are three of the largest:  

The first is in the regulatory area.  Vietnam’s regulatory system is generally less developed than the other TPP parties, and bring its regulatory systems up to a level comparable with other TPP parties’ will be difficult.  While some exceptions may be made to reflect Vietnam’s status as a developing country, Vietnam should not expect to be given a complete pass on these requirements.  

Second, Vietnam’s local industries will experience increased import competition as Vietnam’s duty levels are reduced.  It is likely that Vietnam’s duty reduction commitments will be slightly less than the other countries, reflecting its developing country status, but the country will almost certainly experience increased import competition.

Third, the Vietnamese economy is more protected from foreign investment, and is generally more integrated with the government, than in other TPP countries.  Vietnam will face demands from TPP countries to allow greater access for foreign investment in areas like telecommunications and financial services.  Accommodating these demands will be challenging from a business and a public policy perspective.

To be continued